Housing Woes Have a Domino Effect
If you haven’t yet felt the impact of the nation’s credit crisis, just wait. So far, the turmoil may feel a bit remote for average people: Failed mortgage lenders. Gargantuan write-downs by banks. Foreclosures for people who couldn’t really afford the mortgages they got.
What about the rest of us? Are we in danger? No one knows for sure, but quite possibly, yes.
As the credit crisis seeps into farther-flung corners of the economy, more of us will find it harder — and costlier — to borrow money. The value of the funds in our retirement accounts could shrink. People with subpar credit will likely find it more difficult to qualify for auto and home-equity loans. Even consumers who make the cut may need higher credit scores and more documentation.
Credit card companies are raising interest rates, increasing fees on overlimit charges and late payments, and generally are looking for any way they can to raise capital, because they are losing so much from the crippled mortgage end of their business’ bottom line.
So you see, just these things alone could affect us all, whether we are looking to buy a house, sell a house, or not planning to do either one.
Still, what began as a housing industry downturn more than a year ago has widened into a broader financial industry crisis. Too many risky mortgages were made to people who eventually couldn’t afford their payments. Many such mortgages were bundled into securities that were sold to investors who were often unaware of the risk they were absorbing.
So you think the housing woes don’t have a domino effect on all of us? Think again!
We’d love to hear your comments on this article. Use the comment link below to tell us what you think all of this will do to our overall economy.